Minnesota Wetland Report

The Wetland Conservation Act in 1997 and 1998

A. Overview of the 1997 and 1998 numbers

Reporting WCA numbers for 1997 and 1998 is somewhat problematic due to implementation in 1998 of a new reporting system, the Local Government Annual Reporting System (LARS). Although this will eventually result in more accurate data and better analysis, it makes comparisons between pre-1998 and 1998 numbers difficult.

In general, however, the numbers indicate that WCA is continuing to protect Minnesota wetlands. As has been the case for previous years, data collected from 1997 indicate that most proposed wetland projects were revised entirely to avoid wetlands. Of the 4,548 project proposals reported by local authorities, 74 percent (3,372) were ultimately resolved with no disturbance at all to a wetland. These 3,372 projects, as originally proposed, would have drained or filled an estimated 2,888 acres of wetlands (see Appendix D). These numbers appeared to drop in 1998, but new LARS requirements created changes in how these numbers were recorded. Further analysis will have to wait until the 1999 and 2000 data are gathered.

Projects with unavoidable wetland impacts require wetland replacement via an approved replacement plan. Project sponsors replaced over 384 acres in 1997 and 326 acres in 1998. This compares to replacement of 380 acres in 1995 and 528 acres in 1996. (Additional acres will be replaced by the state on its projects and on behalf of local government public road authorities. See Additional WCA Aspects part B1.)

As in past years, the vast majority of projects impacting wetlands were small, affecting less than 0.2 acres of wetlands (see chart on next page). This holds true for both Greater Minnesota and the metropolitan area. While it is easy to dismiss the effects of these small wetland projects as unimportant, their cumulative impact is significant. Minimizing the draining and filling of small areas of wetlands is one key to the success of Minnesota’s no-net-loss goal.

Two indicators of local government WCA workload and activity appeared to drop from both 1996 to 1997 and 1997 to 1998; however, again because of the implementation of LARS, it’s difficult to tell if these changes are the result of real reductions. Both landowner contacts (i.e., the number of phone calls or visits a local government gets from different landowners considering projects impacting wetlands) and the number of no loss determinations, technical evaluation panel decisions, and cease and desist orders, appeared to drop. A full understanding of trends will have to wait until the data from subsequent years are available.

It should be noted that there are inherent difficulties in assessing wetland numbers, particularly the number of acres avoided and minimized, and even the number of proposed projects that actually threaten wetlands. Authorities have questioned whether proposed development plans may have deliberately overestimated wetland impacts in order to achieve the appearance of minimizing impacts. Many authorities are themselves uncertain about what qualifies as avoidance. On the other hand, the very existence of WCA may deter development impacts to wetlands even before they reach the purview of local authorities. This reporting problem is not confined to the county and state level—federal personnel have struggled for years to track wetland gains and losses (see National Viewpoint, Section X). With the implementation of LARS in 1998, reporting has been standardized and is likely to improve with further refinements to the system.

B. Additional WCA Aspects

B1. Road Replacement

As part of the 1996 amendments to the WCA, BWSR assumed the responsibility from local governments for replacing wetlands lost through repair and rehabilitation of existing roads throughout the state. Replacement in most areas of the state must take place at a 2:1 ratio (two wetland acres replaced for every one lost); in the counties with more than 80 percent of their presettlement wetlands remaining, the replacement ratio is 1:1. In addition, replacement of wetlands in the metro must take place in the metro area.

In the remainder of 1996 after the provision was approved, approximately 54 acres of wetlands were lost due to local government road repair, requiring about 79 acres of wetland replacement. In 1997--the first full year the program was available--local government road work is projected to impact about 300 acres, requiring an estimated 426 acres of replacement (see Appendix E).

The cost of these replacement acres varies from $2,500 per acre in parts of rural Minnesota to more than $100,000 per acre in some parts of the metropolitan area. The program is funded through state capital improvement funds.

B2. Comprehensive Wetland Protection and Management Plans

Under the 1996 changes made to the WCA, local units of government may develop a Comprehensive Wetland Protection and Management Plan as an alternative to strictly following the state WCA rules. These plans allow increased flexibility in wetland replacement, specifically in the location of the replacement site, the replacement ratio, and the "sequencing" process by which local governments determine the extent to which the applicant has attempted to avoid wetlands.

Eleven local governments are developing model Comprehensive Wetland Protection and Management Plans using BWSR funding. Approximately nine local governments are pursuing plans without funding from BWSR. Final approval has been given to five of the funded plans as well as an additional two that did not receive BWSR funding. Two local governments developing model plans are not seeking BWSR approval, including the city of Chanhassen, which is implementing WCA and using a 1994 ordinance to regulate wetland setbacks and buffers (see Appendix F).

C. Wetland Banking

The Minnesota Wetland Banking Program, first offered in 1994, continues to provide an effective and convenient avenue for wetland replacement. Under the program, landowners draining or filling wetlands have the option to purchase wetland "credits" resulting from previously restored or created wetlands, rather than finding and restoring wetland acres on their own.

During 1996 and 1997, the program grew substantially. Cumulative bank withdrawals and deposits leveled off at about 100 wetland acres of withdrawals and 400 acres of deposits in 1998. From the time the program began through March 1998, approximately 1,779 acres were deposited. About 300 of those acres had been purchased or used, leaving a balance of about 1,453 acres. (The Minnesota Department of Transportation restored and deposited about 500 acres of those 1,435 acres for its future road projects.) Approximately 36 counties have wetlands that have been enrolled in the program (see Appendix G).

One of the challenges faced by the Wetland Bank is encouraging entrepreneurs to restore sites for banking. Because wetland impacts must be replaced within the same county or watershed, it is important to local development to have bank sites located across the state. It is also crucial to encourage a diversity of sites. Statewide, seasonally flooded and wet meadows (types 1, 2, and 3 wetlands) make up most of the restored acres deposited since the bank opened. Because upland buffer areas are crucial to wetland functioning, upland acres make up a portion of the banked acres, most of them in the northern region of the state, where more than 80 percent of the pre-statehood wetlands remain.

Deep marsh and wooded bottomlands (types 4 and 6) wetlands comprise a small portion (10 percent) of the banked wetland portfolio, but there are no types 5, 7, 8, or Riverine wetlands.

Deposits to the wetland bank are fundamental to its success; withdrawals are crucial to encouraging landowners to make those deposits. The state buys some credits to offset road impacts by county highway departments (see Section B1); the rest of the demand comes from private development. Current law restricts replacement to within-county or within-watershed bank sites. While this reduces the local environmental impact of wetland destruction, it can be a hardship for developing areas. This rule is modified in the northern region because of the large number of pre-statehood wetlands remaining there.

The cost of wetland credits continues to vary greatly, depending upon location, land value, size and the cost of the restoration construction. Wetland banking credits (the cost per acre) range from about $1,000 to $20,000; the price may be even higher in the metropolitan area. The transaction of wetland credits is a private contract; the state is just beginning an effort to collect financial information on a voluntary basis.

D. WCA Financing

A variety of local units of government—cities, towns, counties, soil and water conservation districts, and watershed management organizations—administer the WCA locally. Local matching funds of $1.67 million complemented 1997 state funding of $1.73 million (allocated to counties as part of the Natural Resources Block Grant) for a total of $3.4 million to implement the program at the local level. State and local funding in 1998 was $3.5 million.

This funding, combined with BWSR support in training and in serving on local technical evaluation panels, allowed local governments to implement the program cost-effectively. In many cases, WCA was incorporated or directly linked to existing planning and zoning or local water planning programs through the development of Comprehensive Wetland Protection and Management Plans (see part B of this section).

E. WCA Enforcement

Department of Natural Resources’ (DNR) conservation officers and other peace officers enforce the WCA. DNR has six wetland enforcement officers coordinating the activities of field officers, local governments, soil and water conservation districts, BWSR and the courts to ensure compliance with the law. In 1997, conservation officers issued 193 cease and desist orders to stop unauthorized work until landowners received approvals. They also issued approximately 84 restoration orders, with technical assistance from the local soil and water conservation districts (SWCDs).

In 1998, officers issued an estimated 131 cease and desist orders and 93 restoration orders. 1998 numbers are estimated based on a 19 percent increase from 1997 numbers reported by local governments.

F. WCA Compensation and Valuation

WCA includes a provision (MN Statute 103G.237) that provides compensation, in the form of payment for a permanent conservation easement, to landowners who have a legitimate replacement plan denied. The only request BWSR has received for such compensation came in 1996 from a longtime owner of a shoreland wetland in Pine County. BWSR approved the request and the owner placed the land under permanent easement and was reimbursed.

The lack of compensation requests is attributable to a variety of factors. First, most landowner contacts do not result in replacement plans, suggesting that most landowners did not have wetlands, had wetlands that were exempt, decided not to proceed with their project or completed their project with no or minimal wetland impacts. Second, local governments almost never disapprove legitimate replacement plans. Typically, local governments work closely with the landowner during replacement plan development; by the time a replacement plan is submitted, the landowner and the local government have already resolved all potential issues.

Although determining the financial value of wetlands is of interest to regulators, none of the theoretical methods proposed so far has succeeded in capturing intrinsic values of non-use associated with wetlands. Benefits of ecologic functions are often overlooked in favor of more easily measured attributes of flood protection and waste assimilation. Adequate site evaluations are rare, leaving little opportunity to assess theories of practical field applications.

A December 1996 paper An Inquiry into the Relationship of Wetland Regulations and Property Values in Minnesota compiled by the staff of the University of Minnesota Department of Applied Economics, College of Agricultural, Food, and Environmental Sciences, summarized critical aspects of the relationship between wetland regulation and property values in Minnesota. The following summarizes the report’s conclusions.

The link between a wetland regulation and a particular property’s value is not as direct as it at first might seem because other regulations might restrict activity on the site. Wetland regulations are presumed to serve the public good on the whole, but the resulting gains and losses may not be distributed evenly among the property owners. This question of distribution has proved important in compensation cases brought before the courts.

Stability must be balanced against the need for laws to change and adjust to a changing society. A reallocation of use rights to someone other than the owner is different from a simple constraint against an owner exercising a certain use. Wetland regulations might shift property interests from landowners to the public, or they might clarify existing constraints on development of certain properties by the landowners themselves.

The report states that observed changes in property values sometimes can be used to estimate the economic effects of a specific regulation. There are many laws, technologies, and preferences that influence price determination, however, and disentangling a single factor such as wetland protection regulations requires careful analysis. Most studies find that regulations actually increase existing nearby property values because regulations ensure that lesser-valued uses will not enter residential neighborhoods.

A measured loss of property value does not automatically mean that a regulation has "taken" a property right. The courts often apply a presumption of "reasonable" expectations on the part of the landowner and may conclude that, while a landowner has a right to some economically viable use, a landowner does not have a right to the use yielding the absolutely highest return. Only after a court first determines that a taking has occurred is the appropriate level of compensation determined. The appropriate measure of a property value loss is the difference between what the property would be expected to sell for, with and without the regulation. This determination may require market analyses, price trend forecasting, or demographic studies, as well as an understanding of what is achievable under current law or technology.

Economists have developed several different ways to measure changes in property value. Direct appraisal is the only way to measure the effect on individual properties; statistical market analysis is used to measure average effects market-wide. Courts traditionally have relied upon measures of net effect of regulation on individual parcels, without considering the (possibly positive) effects on neighboring properties or on the community as a whole. The University staff research did not document a statistical analysis of the links between specific wetland regulations and actual property values. A market study requires data compilation and analysis on a large scale of both time and budget. The alternative, a collection of scattered direct appraisals, tends to be too idiosyncratic and too expensive to be of use to policy makers.

The University paper recommends that the Legislature examine ways to lower public administration costs and to make the land market more efficient without jeopardizing the benefits of existing wetland protection laws. Increasing the availability of wetland information--for example, by providing prior determination of wetlands on zoning maps--has associated administrative costs. Developing a price differential model would reduce the effort involved in determining compensation in each case, but the University report warns that the cost of developing these models might exceed whatever gains in efficiency their use might bring to the market.

Another report by Environment Canada reviewed recent literature on wetlands and economics and included this conclusion:

The economic values of wetlands are still not well documented, nor are they easily captured in established monetary indicators. There is a continuing need for economic values to be identified, measured and reported in order to increase awareness at all levels of the benefits of wetland protection and conservation efforts…. Given the variety of benefits provided by wetlands, the variety of methods derived for their measurement, and the general lack of comparative studies, support for multifaceted investigations of a variety of wetlands, evaluated by a variety of methods, is warranted.*

G. WCA Appeals

The act has an administrative appeals provision (MN Statute 103G.2242) allowing landowners to appeal administrative decisions regarding replacement plans; landowners may not appeal technical decisions such as wetland type or boundaries. In 1997, eight appeals were filed; in 1998, nine appeals were filed (up from five appeals in 1994, three in 1995 and seven in 1996).

BWSR staff and BWSR Dispute Resolution Committee members averaged 550 hours annually on appeals administration, including 100 hours from the Attorney General’s Office.

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